Drax and Infinis Challenge Climate Change Levy Policy

Drax and Infinis Challenge Climate Change Levy Policy

Drax (who operate a major biomass portfolio) and Infinis Energy (who have landfill gas and wind energy interests) are seeking a judicial review of the Government’s changes to Climate Change Levy (CCL) exemptions and the effects of the change on clean energy generation.

While we understand that they are not going to be challenging the tax itself (even though imposing it upon low-carbon technologies has been widely criticised by the industry) the judicial review will focus on the 24-day notice period prior to introduction of the changes, arguing that this timescale was excessively short and therefore not fair or proportionate. The Government has said that it will defend the claims, and has reiterated the need to bring costs down.

Investor confidence in the UK renewables sector has been undermined by successive policy changes in recent months, many of which were not heralded in the Conservative Party manifesto and have taken the industry by surprise. The Government may face a range of legal challenges against the changes, with rumours of impending action in respect of the end to support for onshore wind and the early end to the Renewables Obligation for large scale solar.

It is noteworthy that the CCL works very differently from ROCs and FITs and has never carried any implicit, let alone express, assurance that the exemption for renewables (and, therefore, the income from LECs) would be available over any particular time period or could be ‘locked into’ a commissioned project.  As such, it was susceptible to change at some point, although we expect that there will be arguments that recipients of LECs income had a legitimate expectation that changes would be heralded by a lead-in period which would allow a reasonable time for adjustment to financial models.  Conversely, other changes to tax are often brought in at very short notice (for example, at midnight on the day of the budget speech).

For more information please contact Ian Holyoak, Partner and Head of the Renewable Energy team on ian.holyoak@michelmores.com or 01392 687682.